Why Shouldn’t Amazon Spinoff AWS And Annapurna Labs?
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Here's a closer look at Annapurna Lab's Trainium2 accelerator
Why Shouldn’t Amazon Spinoff AWS And Annapurna Labs?
Timothy Prickett Morgan
Timothy Prickett<br>Morgan
Co-Editor, Co-Founder, The Next Platform
Published<br>tue 4 Aug 2026 // 05:47 UTC
One of the most diabolically clever things that EMC, venerable storage maker and darling of the Dot Com Boom, ever did was swoop in and buy VMware back in December 2003 as the server virtualization transition in the datacenter and the resulting cloud boom were just set to explode.<br>VMware was preparing to go public, with much fanfare, in the wake of the Dot Com bust, which was nearly three years old at that point, to raise heaven only knows how much money. EMC swooped in with $635 million in cash – an offer that co-founders and spouses Diane Greene and Mendel Rosenblum could not refuse. This may seem like a pittance for a company that only had two rounds of funding for $25 million and was largely funded by its founders and employees, btu that was a lot of money way back then. Three years later, as EMC was prepping to take VMware public, it sold a $150 million chunk of VMware, and when EMC did finally take VMware public in the summer of 2007, it ended up with a market capitalization of $26 billion. Dell, of course, bought EMC (and thus a majority stake in VMware) in the fall of 2015 for $67 billion, and even when Dell went private two years later, VMware remained public. In 2021, Dell spun out the huge chunk of VMware it owned, and it wasn’t long before Hock Tan, the chief executive officer at Broadcom, snapped it up and took it private again. VMware has probably brought in on the order of $160 billion in revenues in its history thus far, and is a profitable and slowly growing part of the Broadcom empire.
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I have always contended that there was no way for EMC or Dell to sell VMware to Wall Street because investors already owned VMware by virtue of holding stock in EMC and then Dell. But clearly, I am the crazy one being all literal and such. With more years under my belt and lower expectations in the Era of Open Grift, I have learned in this modern attention economy of ours – and don’t think for a second that I am not happy about this –the world, meaning our collective action driven by very human forces, does not have to make sense. It does not have to make sense. The world, as defined by the various levels of influencers starting at the top of governments and industry and working on down from there, merely has to make us react, act, or not act, as the case may be, and profit by it.<br>And so, as I contemplate the financials of the massive Amazon conglomerate, which has businesses nested inside of businesses and which has attained a market capitalization in excess of $3 trillion in the wake of announcing its second quarter financial results, I inadvertently started a thought experiment about how Bezos, Jassey, Garmin, & Co could unlock a potentially huge amount of “value” by spinning out Annapurna Labs, its chip design business, free of Amazon Web Services and also spin out AWS free of e-tailing and retailing parent Amazon. And what the heck, you could also spin out the media and advertising businesses free while you are at it.
Don’t think I have lost my mind here – I am not talking about complete spinouts. But maybe 20 percent or 30 percent stakes, with the Amazon mothership holding majority stakes.<br>The days when Amazon was a retailer making hardly any money that happened to have a profitable and fast-growing cloud computing businesses are well behind us now. AWS is riding the GenAI boom high, and its own chips as well as those it buys from Nvidia, AMD, and Intel are in high demand for both AI workloads and traditional back office and data analytics stuff that makes the world go round. The company’s Trainium 2 and Trainium 3 capacity for the next two years is largely booked out, chief executive officer Andy Jassy said in his letter to shareholders in April, which is why AWS has confidence in its AI capex. We presume the same is true for the GPU fleet at AWS, but you can’t expect for corporate PR to let Jassy say that if it is true.
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And it is not just GPUs and Trainiums that are selling. Jassy Not one, but two hyperscalers offered to buy out the entire year’s worth of all Graviton capacity for all of 2026. That’s how crazy it is out there.<br>That Annapurna Labs chips business has been transformative for AWS and for Amazon, which its one of the largest users of AWS services in the world.<br>In that letter to shareholders as well as in the financial reports for the first quarter of 2026, Amazon said that the chip unit at Amazon, which includes the Graviton CPU, the Trainium XPU, and the Nitro DPU processors, grew by 40 percent compared to Q4 2025 and had an annualized run rate of over $20 billion as the first quarter of 2026 ended. Jassy...